Coalition Gives Toolmakers Competitive Edge
Pooling resources makes them leaner and meaner
By James R. Koelsch
What do you do when 8% of the manufacturing establishments in your state weaken and begin to die? This was the question facing the State of Michigan in the first few years of this decade. The twin crises of an economic downturn and fierce global competition from countries like China were hitting the state's moldand- die industry hard. Between 1997 and 2002, more than 20,000 workers in these tool shops lost their jobs.
Because the establishments in this industry tend to be very small shops, most lacked the resources to cope with the twin onslaught on their own. For this reason, many have decided to follow the example of a group of ten toolmakers that organized themselves into a coalition called the United Tooling Coalition (UTC) in 2003. With a little help from the state and the Center for Automotive Research (CAR; Ann Arbor, MI), these toolmakers learned to pool their resources and to become leaner and meaner.
The coalition evolved from an informal, precursor organization that started back in 2001. The owners of six family-owned die shops began meeting to brainstorm ways to keep their businesses healthy enough to pass to their children. Afraid of being accused of unlawful collusion, they came to CAR for help. As a respected not-for-profit research organization in the automotive industry, not only could it provide a legal structure for their work, but it also had access to economic and technical data, and to automotive industry executives and governmental agencies.
Within two years, the Michigan Economic Development Corp. (Lansing) caught wind of the venture and began searching for a way to support it financially. Because the MEDC receives more than $1 million a year from the state to offer training and other help to small enterprises, it gave CAR a grant to study how a coalition of toolmakers could work together. "A couple of us went to Japan to study tool shops there," says Jay Baron, president of CAR and director of its Manufacturing Systems Group. "We asked, why are Toyota and Honda's tools perceived to be cheaper than ours?"
Impressed by the recommendations of Baron and his colleagues, the MEDC gave CAR more state money to form a formal coalition. The deal was that each of the original ten member companies would put up $14,000 the first year, and the state would provide matching funds. "The state funding was cut roughly in half the second year," says Baron. "In the third year, there was no more funding." Now, the coalition collects dues to cover its expenses.
Since its official founding in 2003, the coalition has added five members and lost none. Members use these facts as a measure of its success. "About 33% of the tooling industry in the state has gone out of business," explains Steve Drake, president, Master Precision Mold Technology (Greenville, MI), a member company that builds injection molds. "Statistically, we should have had five [coalition] companies go out of business."
In fact, the opposite has happened. The members are thriving. Drake attributes the growth of his own moldmaking business to the coalition. "When I joined, I had fewer than 40 employees," he says. "Now I have 100." He, moreover, was able to capitalize on his newfound relationships to start another adjunct business to contract tools, tooling components, piece parts, and assemblies overseas.
The boost in business was driven by two changes in the way shops did business; a joint sales-and-marketing effort, and a continuous improvement program built around lean manufacturing. The initial sales model was for the coalition to bid on work as a coalition, and to divvy the work among the members. "No customer was happy with that arrangement," reports Baron at CAR. "They wanted to source tools to one company so they could hold one person responsible if a problem were to develop."
The coalition decided to change its tactics, adopting a flexible, leadcompany sales model. Now, one company lands a contract and subcontracts portions of it to other coalition members. "Sometimes we'll appoint somebody to be the lead before we go to a potential customer," says Baron. Other times, the customer chooses the lead company. In yet another scenario, the lead company will land a contract through its own sales efforts, and will share any ancillary portions and overflow of a program with the coalition.
In all these scenarios, being part of a coalition expands the range of jobs that the members can pursue. Lead companies can bid on jobs that are bigger than they could otherwise handle, and that perhaps require special capabilities they don't have, but others in the coalition do.
In coalition sales, the lead company is always free to act in its own best interest and according to the desires of the customer. "We don't mandate that the lead company stay inside the coalition," says Baron. "We want members to make the first effort to keep it inside, but we recognize that they might need to go outside to serve the customer best."
The extra business gained through the coalition is substantial for some members. For example, it represents about 10% of the business at Accu-Mold Inc. (Portage, MI), according to David Martin, its president. For most other companies, though, business from the coalition is much less, often quite small. For them, the benefits of membership really lie with the help that they receive in adapting to today's marketplace. "We have made a much bigger impact on our member companies by helping them to become leaner, control their costs, and learn how to be better at what we do, rather than by pushing the sales line," says Drake at Master Precision.
One way that the coalition does this is through the meetings that occur at one of the member companies approximately every month. The agenda often contains intelligence reports from CAR based on the research that it conducts on the state of the automotive industry. The agenda also includes a presentation by the host on a topic at which the host feels it excels, such as engineering, scheduling, quoting, or lean manufacturing. Drake, for example, plans to speak on identifying and controlling costs when his turn comes.
Large and small companies alike have benefited from this sharing of best practices. Accu-Mold, one of the smallest members and a specialist in over-molding, adopted a key success indicator called first-sample success. "We've always measured on-time performance, but that is quantitative, not qualitative," says Martin. "In the past, we might have delivered the tool on time, but relied on three or four rounds of adjustments in the approval process to tweak the tool so it produces perfect parts." The goal of adding the new measure is to deliver a tool that makes perfect parts the very first time it's used.
Another presentation moved Richard Tool and Die (New Hudson, MI), among the largest members, to adopt downtime as an important productivity measure. "Anytime that a machine wasn't cutting steel, they [the workers] studied all the different reasons why," says Steven Rowe, executive vice president of the 80-employee company. "They developed a sophisticated system for quantifying all the various reasons. It let them analyze problems, look for the biggest contributors, and go to work on them." The method has the potential to yield much more uptime than just focusing on faster and more-efficient toolpaths.
Bringing in outside experts was the other way in which the coalition helps its members to become leaner and control their costs. CAR, for example, was able to bring in Mark Stevens, the director of metal fabrication at General Motors, to explain how GM's fabricating operations went about becoming leaner. A year and a half ago, CAR also convinced six Toyota engineers to spend two days at coalition shops, offering advice. "One of the big things that they hit all of us with was visual management," says Master Precision's Drake. "You should be able to see what's going on within seconds of walking into the shop."
Using its funds, the coalition also hired some consultants. One group trained the members in activity-based cost accounting and project management. Not only did the training show each shop how to be more efficient, but it also helped them to develop common procedures for working together. The second group of consultants gave them basic training in lean manufacturing. In addition to the classroom training, the consultants came to each shop to assess the leanness of its operations, and write detailed action plans for making them leaner.
The outside experts helped the coalition members overcome the frustrations that they were having with implementing lean manufacturing. The reason is that each mold or die is a highly engineered product typically made in quantities of one. "Our goal had been a Toyota manufacturing system, but we learned that we can't get there because we don't have the same kind of manufacturing system," says Drake. "It's just not easy to implement lean on a process that is not flow."
He and his colleagues, nevertheless, learned some valuable lessons for taking lean manufacturing as far as they could. Master Precision, for example, learned how to pull work through its shop so that it doesn't sit anywhere. "We realized that we must schedule our jobs differently—in such a way that the next person down the line is waiting and asking for it," says Drake. He developed a way to couple people with the product to ensure that it flows through the shop.
At Richard Tool and Die, a consultant helped a cross-functional team implement visual management, a central lean concept. They embedded the concept into a critical workcell that produces most of the small details that go into the company's large progressive and transfer dies. The team was able to suggest a dozen or so ways to improve the sluggish productivity of the machining center at the heart of the cell.
Among the suggestions was that the operator should put a detail aside if he encounters a problem and go to the next one. Because the problem detail sits in a particular place, it is a sign to the die maker or supervisor that one of them needs to research and solve the problem. Before this change was instituted, the operator would have to do all of the research, which took him away from the machine and stopped production. This simple change in method relieved a bottleneck.
The cross-functional team came up with other ideas, but they would take more money and time to implement. "We started with the cheapest, fastest ones first to get some immediate benefits that added credibility to the entire process," says Rowe. Eventually, he moved to the longer-term, more expensive solutions, such as new strategies, cutting tools, and fixtures.
Once the company implemented the suggestions, the shop exceeded management's target throughput for the machine. "When we started, there were a lot of skeptics who said that there was no way that we're going to achieve it," says Rowe. "My response was, 'prove that we can't.' Not only did we achieve the goal, but we beat it by 25%."
Tax breaks are another benefit of membership in the UTC. At least, for those companies that qualify for them. Taking the recommendations in the paper that CAR wrote for the MEDC, the State of Michigan allowed tooling coalitions to attach themselves to one of the 34 nearly tax-free Renaissance Zones created by the state to spur investment in economically distressed areas. Through the UTC's attachment to one of these zones, roughly two-thirds of its member companies were able to qualify for tax breaks.
Although some members simply let elimination of this expense lower their overall costs and improve their competitive positions that way, others like Accu-Mold designated the money for specific investments. The company used the funds to acquire two pieces of expensive equipment that it would not have been able to justify otherwise, a $300,000 Roku-Roku high-speed machining center, and a $120,000 Trumpf laser welder. "The tax breaks allowed us not only to accelerate our rate of acquisitions, but also to invest more in higher-end equipment," says Martin. "The benefits have been significantly higher accuracy, more efficiency, and shorter lead times than five years ago."
The high-speed machining center generates efficiency by milling hardened steel and holding 50 millionths accuracy. These abilities reduce the number of times that people need to touch the workpiece. The machinist can cut features into a hardened workpiece, eliminating the time and error associated with putting it back on the machine for finishing once it returns from the heat-treatment facility. The high spindle speeds also enable the machine to generate extremely fine finishes, reducing the amount of labor-intensive polishing required.
The laser welder generates efficiency through its precise application of heat, which streamlines the shop's ability to make engineering changes and repairs on both molds under construction and tools already being used in production.
"The laser welder lets us add steel in a more intricate fashion," explains Martin. "It can put a dot of material on the head of a straight pin that you take out of a new shirt, and it doesn't destroy the parent steel." A laser delivers a large amount of heat to a very concentrated area, melting the material so quickly that it can accomplish the job before the heat has time to flow into the surrounding material and cause damage.
For these reasons, Martin describes laser welding as "minimally invasive mold surgery." The ability to put filler in the exact spot needing it, and to contain the effects of the heat, means less grinding, polishing, and other cleanup work afterward. "Conventional TIG welding does serious damage to the parent steel", he says. "The laser allows us to make much more intricate repairs and changes on molds at a much faster pace." He spends less time on the repair, passes less cost to the customer, and delivers a much higher-quality mold.
And faster turnarounds and lower cost are important business drivers in today's lean and mean automotive industry. Many of his customers have reduced the number of molds that they keep on hand. "Rather than having two molds, they might have one," says Martin. "So if it goes down on a Friday night, they want it back on Monday." Belonging to the coalition has definitely given Accu-Mold a competitive edge that it needs to prosper in today's global economy.
This article was first published in the September 2007 edition of Manufacturing Engineering magazine.